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Outlook good for B.C.'s manufacturing, forestry sectors in 2013

Conference Board of Canada outlook puts Vancouver near top of municipal economies

The revitalization of B.C.'s shipbuilding industry is one of the reasons the Conference Board of Canada is upbeat on the province's short-term economic prospects.

Photograph by: ADRIAN LAM
, TIMES COLONIST

British Columbia’s manufacturing and forestry industries should enjoy respectable growth in 2013, a new report from the Conference Board of Canada suggests.

The board’s annual Metropolitan Outlook suggests a revitalization of the province’s shipbuilding industry should commence later this year as Vancouver Shipyard completes $200 million worth of infrastructure upgrades needed to accommodate an $8-billion contract to build seven new vessels for the Canadian Coast Guard. Work on two smaller vessels is expected to begin later this year.

“Right now it will be the construction (sector) that benefits,” board economist Greg Sutherland said in an interview. “Then you will see it more in transportation and manufacturing, once the construction finishes.”

The manufacturing sector will also benefit from a recovery in U.S. housing, the primary market for B.C. lumber.

The board expects total manufacturing output to rise 3.6 per cent this year and 2.1 per cent in 2014.

However, within a couple of years, the forest sector will face ongoing supply constraints arising from the ongoing pine beetle infestation, the board warns.

“Supplies of salvageable pine beetle-infested wood will start to run out. This is expected to tip the industry into a downturn as it adjusts to the significant reduction of available timber,” the report said.

Sutherland said the sector’s short-term prospects are better than many would expect.

“Housing starts in the U.S. have come back. Sometimes you wouldn’t know it if you watched the news but the data does show that they are building again, significantly, south of the border. So that increases the demand for B.C. lumber. But there is definitely a supply constraint because of the beetle, more in the medium term, but it’s coming.”

Overall, the board expects B.C. to achieve 2.7 per cent real GDP growth this year compared to 1.8 per cent in 2012, and then hold at 2.5 to 2.6 per cent per year through 2016.

In Metro Vancouver, the board foresees some recovery in the local real estate market — helping the finance, insurance and real estate sector, which grew 1.9 per cent last year compared to an average 4.1 per cent over the past quarter-century.

Vancouver housing starts will drop after three consecutive years of double-digit growth, which “will clear up the current slight overbuilding as the ratio of housing starts to population growth over the past two years exceeded its 25-year average.”

The report noted a “sharp correction” in the housing resale market which saw annualized sales drop more than 20 per cent.

“A decent economy is poised to turn the resale market around in 2013, leading to 3.5-per-cent growth in finance, insurance and real estate output,” the report said.

“What we’ve seen for the year as a whole in 2012 – and it has kind of changed in the last two months – was fewer listings on the market,” Sutherland said. “People don’t want to jump into a market where it might take a long time to sell or where they might not get the price they want.

“That kind of changed in December and January. Prices went back up. They didn’t regain the complete losses from the previous 12 months. We believe there is not going to be a major correction. Buyers have been taking a wait-and-see approach, and we kind of feel that the ‘wait-and-see’ is over.”

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